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Use the following information for questions13–16. Tier II Company uses a periodic inventory system. Details for...

Use the following information for questions13–16.

Tier II Company uses a periodic inventory system. Details for the inventory account for the month of January, 2008 are as follows:

                                                           Units              Per unit price               Total

Balance, 1/1/08                          200                     $5.00                   $1,000

Purchase, 1/15/08                     100                       5.30                        530

Purchase, 1/28/08                     100                       5.50                        550

An end of the month (1/31/08) inventory showed that 120 units were on hand.

13.     How many units did the company sell during January, 2008?

a.   80

b.   120

c.   200

d.   280

14. If the company uses FIFO, what is the value of the ending inventory?

a.   $520

b.   $600

c.   $656

d.   $1,424

15. If the company uses LIFO, what is the value of the ending inventory?

a.   $520

b.   $600

c.   $656

d.   $1,480

16. If the company uses FIFO and sells the units for $10 each, what is the gross profit for the month?

a.   $1,376

b.   $1,424

c.   $2,800

d.   $3,000

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Homework Answers

Answer #1

Answer 13

Opening Balance 200 units

Add: Purchase on 1/15/08 100 units

Add: Purchase on 1/28/08 100 units

Less: Closing balance 120 units

Sales made during January = 280 units

Answer 14

Value of ending inventory if the company uses the FIFO method

Closing Inventory will consist of:

20 units bought on 1/15/08 @ $5.30 per unit = $106

Add:100 units bought on 1/28/8@$5.50 per unit = $550

Therefore Value of closing inventory =$656

Answer 15

Value of ending inventory as per the LIFO method

Balance 120 units will be left of the opening balance

i.e. 120 units @ $ 5 per unit = $600

Answer 16

Cost price of Sales made as per FIFO method:

200 units@ $ 5 per unit $1000

Add: 80 units @ $ 5.30 per unit $424

Cost of 280 units sold =$1424

The selling price of 280units @ $10 per unit = $2800

therefore Gross Profit = $1376

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